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ECONOMICS 302
INTERMEDIATE MACROECONOMICS
Spring 2017
Professor:
Office:
Phone:
Office Hours:
Jan Ondrich
426 Eggers Hall
x-9052
TTh 11-12 a.m. 3:30-4 pm and by appointment.
Email:
[email protected]
Text:
Robert J. Gordon, Macroeconomics, Twelfth Edition. Chs1-8. Pearson
Custom Library for Professor Jan Ondrich.
Available in S.U. Bookstore -- earlier editions of Gordon’s text will not
suffice.
Course Description:
Economics 302 is a one-semester course in intermediate macroeconomics and is a required
course for all economics majors. The prerequisite for the course is ECN 203. Students who have
questions about course sequencing should meet with an economics advisor. Calculus will not be
used, but a reasonably good understanding of algebra (and graphs) is assumed.
Macroeconomics is the study of interrelationships among economic aggregates, including
employment, the inflation rate, consumption, investment and gross or net domestic product. The
goal of this course is to help students understand the institutions that shape both the modern market
economy and modern global economy, and to familiarize them with tools that have been developed
for analyzing the performance of these economies over time. Moving through the text at the rate of
about a chapter every three lectures (less time for less difficult chapters and more time for more
difficult chapters), I hope to cover the first eight chapters in their entirety. The readings will be
supplemented by discussion of topics of current concern to financial markets in the global economy.
Grading:
This course is on the Syracuse University Blackboard System. Students can access the
Blackboard System by typing in the following URL—
http://blackboard.syr.edu
and then logging in with their NetID and password. Students are responsible for checking for
announcements every Thursday evening, although frequently there will be no announcements.
Student grades will be determined by performance on three problem sets, two mid-term
examinations and a final exam. The highest two grades on the problem sets will count 10% each
(but please note that in the past students have done better on the earlier problem sets). The
importance of providing comprehensive answers to the problem sets before the next test necessitates
the implementation of absolute deadlines for each problem set, after which no work can be accepted.
In fact, there will be two deadlines for each problem set, but no student can hand in any
problem set more than once (the penalty is an F for the course). Students who hand in their work
before the first deadline, will receive corrected problem sets before each test. Students who miss the
first deadline will not incur a grading penalty, but will not get their problem sets back before the
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succeeding test. Students who miss the second (absolute) deadline, defined by an exact time during
the day, will not have their work graded. There will be no exceptions to this rule. Students will be
given about two weeks to complete each problem set, and will be told the due dates at least one week
beforehand, both in class and through a Blackboard announcement. Although students may work
together to come up with answers, each submitted assignment must represent the intellectual effort of
the individual student. Assignments handed in by a team will not be graded, nor will identically
formatted answers printed out several times, or assignments cut and pasted in any way by word
processor.
Each of the mid-term examinations will count 20%, while the final will be worth 30%. The
mid-term examinations will take place on class days (but not necessarily class periods), while the
final will be given in the final examination period. Graphing calculators are NOT allowed during
tests. (The Science and Technology Library will lend students appropriate calculators on a short-term
basis.) Use of graphing calculators, copying from other students or using cribs during tests is an
academic integrity violation and will result in an F for the course.
The remaining 10 percent of the grade is based on class participation. For this purpose
attendance will be taken 4-5 times during the semester at random.
Students should recognize that the work as presented is not crammable. This means that
there is not a book somewhere in the library that mimics the classroom presentation. Rather the
classroom lectures complement the text by moving from the simple to the complex in a way that is
meant to enlighten the student who attends class consistently. Students who attend class consistently
(catching up on missed days by getting the class notes from a friend) and do the assignments should
expect a high grade; students who attend sporadically or have incomplete notes should not expect to
pass the course.
Some students may need academic accommodations due to a disability. These students
should discuss their needs with me at the beginning of the semester. They should be registered with
the Office of Disability Services (443-4498) and have an updated accommodation letter for me.
Accommodations and related support services such as exam administration must be requested 2
weeks in advance of each test. ODS test and exam times must overlap the times tests and exams are
taken in class.
SU’s religious observances policy recognizes the diversity of faiths represented among the
campus community and protects the rights of students, faculty, and staff to observe religious holy
days according to their tradition. I will provide students an opportunity to make up any examination,
study, or work requirements that may be missed due to a religious observance recognized by the
University, provided they notify me beforehand.
Readings:
1. Gordon, Chapter 1: What is Macroeconomics? pp. 1-24.
The chapter presents an overview of macroeconomics with definitions of important concepts
such as GDP, short-run and long-run. Chapter lays out the “Big Three” concepts of macroeconomics
and has a section on macroeconomics at the extremes. It concludes by discussing stabilization policy
and the “internationalization” of macroeconomics.
2. Gordon, Chapter 2: The Measurement of Income, Prices and Unemployment, pp. 25-56.
The circular flow of income is introduced and an algebraic analysis of the circular flow is
started using the “Magic Equation”. The components of the National Income and Product Accounts
are studied. The difference between the “old” implicit GDP deflator and the “new” chain-weighted
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GDP deflator is discussed. The chapter concludes with a discussion of the measurement of
unemployment.
3. Gordon, Chapter 3: Income, and Interest Rates: The Keynesian Cross Model and the IS
Curve, pp. 57-92.
Gordon introduces the concept of equilibrium in the goods market as the point at which
income equals planned expenditures. Thus, if unplanned expenditures are nonzero, the goods market
is out of equilibrium. The consumption function is introduced and its importance in the equilibrium
condition is explained. The “multiplier” effect of exogenous changes in aggregates such as planned
investment, government spending, and net exports is described. The importance of interest rates in
the consumption decisions of households and the investment decisions of firms is described. Finally,
the IS curve is derived as the locus of points in (Y,r)-space at which the goods market is in
equilibrium.
4. Gordon, Chapter 4: Strong and Weak Policy Effects in the IS-LM Model, pp. 93-128.
Gordon introduces the money market generally and the role of the money in a modern
macroeconomy. The LM curve is derived as the locus of points in (Y,r)-space at which the money
market is in equilibrium. Together with the IS curve, a complete equilibrium in (Y,r)-space can now
be described. The possibility of fiscal expansion crowding out investment is discussed. The chapter
ends with a discussion of the strong and weak effects of monetary and fiscal policy.
5. Gordon, Chapter 5: Financial Markets, Financial Regulation, and Economic Stability, pp.
129-166.
Gordon introduces the concepts relevant to the housing bubble and financial market
meltdown, including risk, leverage, and securitization. Balance sheets are introduced to contrast
traditional banks with the “wild West” of finance in which loans are financed not from deposits but
by borrowing. The post-2001 housing bubble is compared with the stock-market bubble of 19271929 that led to the Great Depression.
6. Gordon, Chapter 6: The Government Budget, the Government Debt, and the Limitations of
Fiscal Policy, pp. 167-200.
Gordon begins with a discussion of the pervasive effects of a government budget deficit. He
distinguishes between the structural and cyclical components of the budget deficit and discusses the
automatic stabilization that has been built into the cyclical component as well as the impact of
discretionary fiscal policy on the structural component. He introduces the basic concepts of
government debt and examines the historical behavior of the debt-GDP ratio.
7. Gordon, Chapter 7: International Trade, Exchange Rates, and Macroeconomic Policy,
pp. 201-242.
Gordon introduces the basics of the balance of payments, the current account and the capital
account. Foreign exchange rates are discussed and their relationship to the domestic interest rate is
analyzed. The ramifications of the two main exchange rate regimes, fixed and flexible, for monetary
and fiscal policy are discussed in the cases of perfect and imperfect capital mobility.
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8. Gordon, Chapter 8: Aggregate Demand, Aggregate Supply, and the Great Depression, pp.
243-277.
Gordon allows prices to vary for the first time so that aggregate supply and demand curves
for the modern macroeconomy can be defined. The determination of wage rates in the labor market is
explained. Finally, the discussion turns to the contributions of the Keynesian Revolution in
explaining the failure of self-correction during prolonged depression.